(H.R. 1106) On the Lofgren of California amendment to expand the ability of bankruptcy judges to adjust home mortgages, which was offered to a bill designed to prevent mortgage foreclosures and increase the availability of mortgage credit.

This was a vote on an amendment offered by Rep. Lofgren (D-CA) containing a number of changes that the Democratic majority and The Obama Administration wanted made in a bill designed to prevent mortgage foreclosures and increase the availability of mortgage credit. The amendment allowed a bankruptcy court to consider lowering the mortgage interest in accordance with a plan the Administration had just developed. The plan required, among other things, that the debtors demonstrate they had made good faith attempts to modify the mortgages through voluntary agreements with lenders.

Rep. Lofgren, arguing in support of the amendment and of the underlying bill, said that homeowners “who engage in bad faith, such as filing for bankruptcy when they could really afford to pay their mortgages, will be disqualified for assistance . . . and (the amended bill) achieved a balanced reform that will bring meaningful help to families in genuine need without costing taxpayers a dime. The bill is not going to usher in a rash of bankruptcy filings. In fact . . . it is designed to keep more families out of bankruptcy and out of foreclosure.”

Rep. Smith (R-TX), speaking in opposition, said “this amendment does little to change the fact that the bankruptcy provisions in this legislation will fail to solve the foreclosure crisis . . . . Meaningful change would have meant a true requirement for bankruptcy petitioners to exhaust other options before going to bankruptcy court . . . . (The) amendment does not do that. Rather, it merely requires that judges consider whether the lender offered the borrower a loan modification when determining whether to approve the borrower's bankruptcy plan. . . Meaningful change also would have meant substantially narrowing the class of loans eligible for bankruptcy modification.”

Most mortgage lenders had opposed the legislation. However, Rep Welch (D-VT), a proponent of the bill, noted that Citigroup supported it “because they understand that we have to stabilize home values in order to begin the recovery, and they need a tool to accomplish it.”

The amendment passed by a vote of 263-164. Two hundred and fifty-three Democrats and ten Republicans voted “aye”. All 164 “nay” votes were cast by Republicans. As a result, provisions expanded the ability of bankruptcy judges to adjust home mortgages were added to the bill designed to prevent mortgage foreclosures.